From the Virginia Society of Certified Public Accountants - Presented
by Dean Knepper, CPA, CFP®

YEAR-END TAX TIPS FOR SMALL BUSINESS OWNERS

(October 1, 2006) -- Now is a great time to start thinking about year-end
tax planning for your business. These seven tax strategies, brought to you by
the Virginia Society of CPAs, can be put into effect to reduce your tax liability
come April 15, 2007.

1. Save for retirement

Contributing to an Individual Retirement Account (IRA), Keogh, simplified employee
pension (SEP) or other retirement plan is one of the best ways to reduce your
taxable income and secure your financial future. While you have until your federal
tax filing date to contribute, the sooner you make your contribution, the more
you’ll benefit from tax-deferred compounding. The rules, contribution
limits and deadlines differ, depending on the plan you choose. A CPA can help
you determine the best option for you.

2. Buy necessary equipment

If you are thinking about upgrading your computer system, purchasing furniture
or buying machinery or other equipment for your business, purchasing it now
will enable you to write off the costs against this year’s income. The
Section 179 deduction permits you to “expense” or fully deduct up
to $108,000 of qualified equipment purchases in 2006. New and used equipment
qualifies, and if you’re short on cash, you can finance the purchase.
Bear in mind that you must put the equipment into service before December 31,
2006, to qualify for the write-off on your 2006 tax return.

3. Time your income and expenses

Many small businesses use the cash method of accounting. If yours is one of
them, you have some flexibility in timing income and deductions. This can help
you reduce, or at least defer, paying taxes on your profits. The easiest way
to do this is to hold off on sending out invoices until very late in the month
so that you don’t receive payment until next year. On the expenses side,
wherever possible, try to accelerate deductions into 2006 by stocking up on
supplies, paying employee bonuses, making charitable contributions and prepaying
January bills during the last quarter of the year.

4. Put your children to work

Rather than paying your children an allowance, putting them to work for your
business allows you to deduct the money you pay them from your taxable income.
If you operate a sole proprietorship, you don’t pay Social Security or
federal unemployment taxes on wages paid to your child under age 18. A dependent
child with no investment income can “shelter” up to $5,150 of earned
income in 2006 before he/she has to file an income tax return. Just be sure
that the wages you pay are reasonable for the work done by your child.

5. Learn more about the home office deduction

Depending on how you use your home for business, you may be able to deduct
a portion of your rent or mortgage payment, property taxes, utilities and maintenance
and repair costs. The rules are complicated and you’ll want to check with
your CPA before proceeding, but if you qualify, the savings can be substantial.

6. Keep track of deductible expenses

Even if you don’t take the home office deduction, there are many expenses
you can deduct to reduce your tax bill. Examples of deductible expenses include
what you pay for office supplies, advertising fees, professional services, business
insurance, phone and Internet, postage and shipping, magazines and journals
related to your work, and 50 percent of the cost of meal and entertainment expenses
associated with the conduct of your business. Just be sure to hold onto your
receipts and keep accurate records of what you spend.

7. Meet with your CPA

It’s a good idea to meet with a CPA in the final quarter of 2006 so you
don’t miss out on any deductions you are entitled to claim. Working with
your CPA, you can make the most of these and other year-end tax-saving strategies.

The Virginia Society of CPAs is the leading professional association
dedicated to enhancing the success of all CPAs and their profession by communicating
information and vision, promoting professionalism, and advocating members’
interests. Founded in 1909, the Society has nearly 8,000 members who work
in public accounting, industry, government and education. This Money Management
column and other financial news articles can be found in the Press Room on
the VSCPA Web site at www.vscpa.com.